how can an Annual Percentage Rate (APR) of 26.70% be converted to a monthly rate?

Hello and Good Morning Everyone,

              I am wondering how an Annual Percentage Rate (APR) of 26.70% be converted to a monthly rate.  Speaking hypothetically, I will put these numbers out here in order to capture or clarify my question.  An account has a balance of $500 with an APR of 26.70%. Given this information, how much interest would be added to this balance within one month?

              Thank you

              George
GMartinAsked:
Who is Participating?

[Product update] Infrastructure Analysis Tool is now available with Business Accounts.Learn More

x
I wear a lot of hats...

"The solutions and answers provided on Experts Exchange have been extremely helpful to me over the last few years. I wear a lot of hats - Developer, Database Administrator, Help Desk, etc., so I know a lot of things but not a lot about one thing. Experts Exchange gives me answers from people who do know a lot about one thing, in a easy to use platform." -Todd S.

JohnBusiness Consultant (Owner)Commented:
If they use Simple Interest for calculation (you need to ask them). Then 26.7% is 0.07..% per day, so the interest on $500 for a 31 day month is $0.37 per day or $11.34 for the month.  Verify: $500 x 26.7% = $133.50 per year / 12 = $11.13

I hope this helps.

Experts Exchange Solution brought to you by

Your issues matter to us.

Facing a tech roadblock? Get the help and guidance you need from experienced professionals who care. Ask your question anytime, anywhere, with no hassle.

Start your 7-day free trial
JohnBusiness Consultant (Owner)Commented:
Also, if you need more precision (I typically do not), you need to know from the institution if interest is simple, compounded monthly, weekly or daily, in advance or in arrears.  The fine print on any statement will give you the exact daily rate for the APR.
Dr. KlahnPrincipal Software EngineerCommented:
For interest compounded monthly (the usual case for credit cards):

Take the log (any base) of the interest rate, in this case 1.267.  Log(10) 1.267 = .102777

Divide by the number of compounding periods, in this case 12.  .102777 / 12 = .008565

Take the antilog of that value.  antilog(10) 0.08565 = 1.019917

The monthly rate is that value less 1, in this case 1.9917 percent.

So for your example the $500 becomes $509.96.  Less  the original $500, the interest is $9.96 in the first month.

And this is why credit cards eat you alive if you don't pay them off every month.
GMartinAuthor Commented:
Hello and Good Afternoon Everybody,

              Thank you for sharing  your calculations.  This is certainly good information to know.

              George
JohnBusiness Consultant (Owner)Commented:
You are very welcome and I was pleased to help you with this.
It's more than this solution.Get answers and train to solve all your tech problems - anytime, anywhere.Try it for free Edge Out The Competitionfor your dream job with proven skills and certifications.Get started today Stand Outas the employee with proven skills.Start learning today for free Move Your Career Forwardwith certification training in the latest technologies.Start your trial today
Miscellaneous

From novice to tech pro — start learning today.